How New Mexico is Keeping Carbon Pricing in the Climate Conversation

March 7, 2019

New Mexico Roundhouse

Governor Lujan Grisham recently signed an executive order, committing the state to taking aggressive action against climate change. While the order is still in the early planning stages, a separate proposal intending to put a price on carbon emissions was heard by the legislature this week. Senator Soules’ SB 393 “Next Gen Carbon Emission Plan”, which will impose a fee on carbon emissions from gasoline and natural gas consumption in New Mexico, remains in the Senate Corporations and Transportation Committee after a tied vote Monday night.

With New Mexico’s legislative session ending in just 10 days, the bill is not expected to pass this session. However, between the governor’s developing plans and the relentless efforts of Santa Fe youth, carbon pricing is set to remain a focus in New Mexico in the coming year. It is, therefore, worth reviewing the bill, its importance in the context of state politics, and a way to move forward with carbon pricing in the third-largest oil producing state in the contiguous US.

What does the bill do?

Adds a surtax to gasoline and natural gas equal to $10/metric ton of CO₂ emitted, increasing by $10 per year until it reaches $50

60% of revenue is returned to low-income households as an income tax credit

15% is directed to the Low Income Home Energy Assistance Program

15% is invested in renewable energy and climate adaptation

10% is directed to workforce solutions to provide job training to communities experiencing job loss due to the shrinkage of fossil fuel industries

What is the importance of this bill?

New Mexico, deemed the Land of Enchantment, embodies many of the challenges that many state-level carbon pricing initiatives across the U.S. face. Legislators are concerned with potential losses and stifling of activities related to oil and gas production. In the case of New Mexico, fossil fuels earned the state more than $4 billion in revenue last year in the form of royalties, taxes, land income, and investment income. To challenge this industry is to challenge a significant portion of the government’s annual budget.

However, for the time being, fossil fuel extraction and carbon pricing can peacefully coexist at the state level. California has implemented and maintained a carbon pricing program since 2012, despite being the third-largest oil producing state at the time. As long as the program focuses on in-state consumption, and allows fossil fuel exports to remain competitive, then opposition from extractive industries can be prevented, or even turned into support. A week prior to Monday’s hearing, dozens of New Mexico oil and gas lobbyists showed up in support of a gas tax increase that would fund improved roadway infrastructure and maintenance. As long as a carbon price does not apply to exported fossil fuels, and stands to tangentially benefit oil and gas production through improved roadway infrastructure, then it may find support from the least likely industries.

The state has serious needs for development, economic diversification, and new sources for government revenue. The state gas tax, which currently sits third-lowest in the country, hasn’t been raised in 25 years. The Department of Transportation, and tangentially the state road fund, needs a significant increase in funding in order to build and maintain proper infrastructure in the state. As the economic viability and competitiveness of fossil fuel-generated power begins to crack, several pockets of the state that are dependent on those industries will need a new source of income and jobs.

All the while New Mexico boasts some of the highest potential for solar in the country, yet currently ranks 26th in the nation for solar employment. Other Southwest states such as Arizona, Nevada, Colorado, and Texas are producing 2 to 4 times more employment from their solar industries. As surrounding states are cashing in on renewable development, officials in New Mexico are beginning to realize the potential benefits from diversifying New Mexico’s energy profile, government revenue, and economic portfolio. SB 393 and the Governor’s executive order both have the potential to solve these issues by encouraging more efficient consumption of fossil fuels while raising significant revenue to facilitate a transition to renewable resources.

What’s next for New Mexico?

The future of carbon pricing in New Mexico will partly depend on the outcomes of the Governor’s new task force on climate change, which is slated to release a preliminary report on September 15th. Should the executive office integrate an effective market-based solution into its climate plan, then legislative efforts may shift to complement that approach, rather than build a carbon pricing program from the ground up. The stakeholder engagement process that is taking place over this coming year is a pivotal opportunity for the people of New Mexico to have a say in the kind of carbon pricing program that the state needs.

While SB 393 remains in committee after this session, the legislature will continue to play an important role in climate change policy. Senate Bill 489: An Energy Transition Act, which sets renewable electricity standards of 50% by 2030 and 80% by 2040, provides enough financial investment to help the grid retire current dirty generators ahead of schedule, reclaim coal mines, and provide just transition funds for areas negatively impacted by the decline of fossil fuel-generated electricity in New Mexico.

The successful passing of this bill through Senate Corporations and Transportation Committee on Monday speaks to the readiness of the New Mexico for real climate change policy. Despite SB 393 not experiencing the same success, the conversation is trending in the right direction for the Land of Enchantment.

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